Dusseldorf It has been less than two weeks since the head of the board of directors, Stefan Kirsten, announced the new start for the Adler Group. The real estate group should become smaller, more focused and clearer in the organization, said the manager in Luxembourg. And already praised: “Adler is on the way to a new normality.”
On Wednesday, law enforcement shook that new normal. 175 investigators from the Federal Criminal Police Office (BKA) and the public prosecutor’s office searched 21 properties across Europe – including offices, apartments and a law firm. Investigators also moved out in Monaco, Luxembourg and Great Britain.
According to information from the Handelsblatt, the officials were primarily looking for documents on transactions by Adler Real Estate AG from Berlin, which had merged with the Luxembourg competitor Ado Properties and the project developer Consus to form the Adler Group at the beginning of 2020. The allegations: embezzlement, accounting fraud and market manipulation.
The procedure is directed against seven suspects, including former and one current manager. A spokesman for the group said that Adler “fully supports the fastest possible clarification of the facts”.
The accused include the controversial Austrian consultant Cevdet Caner, who is considered by many in the industry to pull the strings behind the group, as well as his wife and Adler shareholder Gerda and his brother-in-law Josef Schrattbauer. The authorities also visited Caner’s defense attorney in his Cologne office. They suspect him of aiding and abetting infidelity.
The media lawyer for the Caner family confirmed the searches, but did not want to comment further due to the “early status of the proceedings”. “We will behave as cooperatively and transparently as possible,” he told the Handelsblatt. Josef Schrattbauer and the criminal defense lawyer from Cologne initially left inquiries unanswered.
Consulting contracts without consideration
Also among the accused are two former board members of the Adler subsidiary: Maximilian Rienecker and Tomas de Vargas Machuca. De Vargas Machuca did not answer any questions. Rienecker’s defense attorney said: “The investigation will show that my client has not violated any obligations.”
However, it is particularly delicate for the Adler Group that the authorities are also investigating Sven-Christian Frank, the chief lawyer for the entire group. He is also a board member of the project development subsidiary Consus. According to Adler Real Estate, Frank was responsible for “operational management and transactions” until March 2021.
Adler did not want to comment on this when asked. Frank also left questions unanswered.
The public prosecutor accuses the accused of incorrectly presenting the Adler balance sheets or providing assistance “in their function as (former) board members” between 2018 and 2020. In addition, consultancy contracts are said to have been concluded “for which, according to the current state of investigation, there was no consideration”.
There is also talk of courtesy offers and sham transactions. These are said to have served to “drive up prices for projects” and to achieve a favorable “Loan-To-Value” (LTV). The LTV ratio puts debt in relation to the value of the property. It is central to Adler: if thresholds are breached, creditors can demand repayment of their bonds.
Purchase price raises questions
At the center of the investigation is a wasteland in the Gerresheim district of Düsseldorf, where the group owns the Glasmacherviertel development area. Adler sold 75 percent of the project to Caner’s brother-in-law Schrattbauer in autumn 2019. The deal went through over the course of a weekend.
The valuation of 375 million euros, on which the purchase price was based, later caused astonishment. Adler calculated internally with a value of 208 million euros, as special auditors from KPMG found out at the end of 2021. They noted: “A comprehensible reason for the higher purchase price could not be presented to us.”
The deal was reversed in the third quarter of 2021 because there were alleged problems with Deutsche Bahn on a neighboring property. It is explosive that Adler nevertheless reported the planned income as “investments held for sale”. According to the KPMG auditors, this led to an “inappropriate reduction” in the level of debt from September 30, 2019.
Did the accused deliberately embellish the LTV? In the past, Adler has insisted on its own figures and contradicted the KPMG results. The company is still of the opinion that the agreed price for the project company “is also correct”. After all, it was shown and certified in several annual financial statements.
In an interview with the Handelsblatt in October 2021, Caner spoke of family liability. “My brother-in-law is his own person.” He himself is a dealmaker, but not the “puppeteer” in the Adler cosmos.
>> Read the full interview here: “The report is an intellectual insult”
The special investigation by KPMG brought astonishing things to light. Accordingly, Caner regularly scheduled strategy meetings with Adler board members, met them on his yacht or made his plane available to them.
KPMG stated: Caner had an influence “in personnel decisions, the preparation of strategic decisions and individual topics from transactions”. In return, he received consulting fees of around 13 million euros. The services rendered are not always understandable.
“Attempted Third Party Influence”
Caner has also been able to rely on the protection of the strong man at Adler in the recent past. A year ago, the head of the board of directors, Kirsten, described the amount of Caner’s fee as quite normal in the industry. Only the type of payment processing is “over the top”.
Although there had been “unlawful attempted influence by third parties in number and depth”, Kirsten said, but in his opinion “there was absolutely no question of systematic enrichment at the expense of other stakeholders”. In Adler’s new normality, this attitude is now being examined by the BKA and the public prosecutor’s office.
The questionable transactions of the real estate group are not only the subject of criminal investigations: A special auditor will also deal with some critical points. The Protection Association of Investors (SdK) was recently able to get a special auditor appointed before the Berlin Regional Court. The decision is before the Handelsblatt. Wirtschaftswoche was the first to report on this. The judges recognize that shareholders have the right to have critical events clarified by an independent body.
Deals from Cevdet Caner are under scrutiny. The special auditor can clarify, for example, whether Caner influenced the business of Adler Real Estate AG to the detriment of the shareholders in 2021 and whether he or people around him benefited from it in an impermissible manner. The special auditor will also deal with a large loan that Adler Real Estate AG had granted to its parent company, the Adler Group.
More: Adler Group writes a loss of 1.7 billion euros